In a fractional reserve fiat banking system, banks are bankrupt by design. The key is keeping the illusion of being sound as long as depositors don't all withdraw at the same time. Right now confidence has been lost in the system, so it's being revealed to all who did not know.

In a fractional reserve fiat banking system, banks are bankrupt by design. The key is keeping the illusion of being sound as long as depositors don't all withdraw at the same time. Right now confidence has been lost in the system, so it's being revealed to all who did not know.

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Quite sounding stupid. Lehman was an investment bank, not a deposit bank. Therefore, fractional reserve doesn't apply to it. Its use of leverage is in the same vein as margined accounts.

FYI The reason why the investment banks are failing is because they have phantom capital. You don't have to look to far but all this off-balance sheet accounting along with the securitization process led to Enron's downfall. Yet they focused on internal controls with Sarbanes Oxley instead of tackling the root cause. Structured finance is an innovative way to borrow from a lender without reporting the liability on their balance sheet.